Giant investment banks JP Morgan Chase and Barclay’s have been fined by the Federal Energy Regulatory Commission (FERC) for rigging electricity markets. Market competition is supposed to help drive down prices for end consumers of power, but the traders at the big banks have been accused of using complex trading strategies to essentially fix prices.
Barclay’s is currently fighting the recent penalty of $453 million over the manipulation of energy prices in the western US from 2006 to 2008. JP Morgan Chase, America’s largest bank, has this week been fined $410 million in wrongful profits. Although the bank has agreed to pay, it is not admitting or denying guilt. A spokesperson for the banks has said, “We’re pleased to have the matter behind us”.
The Federal Energy Regulatory Commission accused traders at JP Morgan Chase of creating complicated schemes that created artificial market conditions, forcing power grid operators in California and the Midwest US to pay for power plants to be idle. This caused them to pay way above the appropriate electricity prices. This occurred over ten months between 2010 and 2011.
Although these fines seem large, to put them into some perspective, JP Morgan Chase’s $410 million fine is under two percent of its record $21.3 billion profit from 2012, or about 1 week of profit for the bank. In terms of its bottom line, this still makes it seem kind of worth the risk of being caught, doesn’t it? And as was mentioned above, the bank has not admitted wrongdoing, even though it’s paying the fine.
Image: NASA/GSFC
Via ThinkProgress, Mother Jones
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